Financial Management Glossary

Copyright, 1980 Temple University Press; Copyright, 1995 Roger A. Lohmann. All Rights Reserved

ACCOUNTABILITY

In nonprofit organizations, a legal and ethical responsibility of management to report upon and justify program performance and achievements.

ACCOUNTABILITY, COMMUNITY

That aspect of general accountability most concerned with the effectiveness and legitimacy of an agency and its programs from the viewpoint of the community.

ACCOUNTABILITY, FISCAL

Direct legal and ethical obligations for the appropriate use of funds by an agency to those from whom it receives funds.

ACCOUNTABILITY, INTERNAL

Responsibility for the appropriate use of shared resources by members of an agency.

ACCOUNTING

The American Institute of Certified Public Accountants defines accounting as "the art of recording, classifying, and summarizing in a significant manner in terms of money, transactions and events which are, in part at least, of a financial character, and interpreting the results thereof."

ACCOUNTING CONTROLS

Procedures to assure the accuracy of accounting records, safeguard assets and authorize transactions.

ACCOUNTING CYCLE

The regular fiscal period of a non-profit corporation between closings. Usually one year. (See also budget cycle)

ACCOUNTING RATE OF RETURN

Ratio of the profitability of an investment comparing the profit “returned” or generated compared to the amount invested.

ACCOUNTS PAYABLE

A liability account reflecting total amounts owed by the fund to others.

ACCOUNTS PAYABLE BUDGET

A sub-fund budget showing balance payable at the beginning of a fiscal period, expected purchases and payments during the period, and closing balance of payables.

ACCOUNTS PAYABLE MANAGEMENT

Explicit development of a management strategy for processing payable accounts.

ACCOUNTS RECEIVABLE

An asset account reflecting the total amounts owed to the fund.

ACCOUNTS RECEIVABLE BUDGET

A sub-fund budget reflecting beginning balances of a fiscal period, expected new receivables and collections, and expected dosing balances.

ACCOUNTS RECEIVABLE MANAGEMENT

Explicit development of a management strategy for processing payable accounts.

ACCRUAL ACCOUNTING

An accounting system increasingly common among human service agencies. Transactions are entered as they are made, which necessitates distinguishing expenditures and cash disbursements. Accrual accounting generally results in more accurate statements of an agency's financial position than does cash accounting.

ACCUMULATED DEPRECIATION

Total depreciation related to a fixed asset taken over the entire period the asset has been owned.

ADMINISTRATIVE COSTS

Costs that are incurred from the overall direction of the organization, general record-keeping, business management, budgeting, general board activities, and related purposes (accepted definition, AICPA'S Audit ).

ADMINISTRATIVE COST BUDGET

A sub-fund budget showing administrative costs (See also overhead budget.)

AGENCY

Non-profit organization of paid employees together with one or more funds and programs.

AICPA

The American Institute of Certified Public Accountants. AICPA was the first group to establish accounting standards for nonprofit organizations in 1974. More recently, the National Accounting Standards Board (NASB) has become the authoritative standard setter for all major categories of nonprofit accounting standards.

ALLOCATION

The act of assigning resources to an entity (agency, budget, department, program) or group of entities. In complex situations, allocation decisions can be distinguished from distribution.

AMORTIZATION

Allocation of the cost of an intangible asset over its entire lifetime.

ANNUALIZED COST METHOD

An approach to comparing capital assets with differing lifetimes. The net present cost of each alternative is determined and translated into a periodic payment for each year of the asset’s life to find the cost/year.

ANNUITY

Any series of payments or receipts in a fixed amount and spaced over a series of equal time periods.

APPRECIATION

An increase in the value of an asset over time. For example, real estate owned by an agency may appreciate steadily over the years. The opposite of depreciation.

APPROPRIATION

A term used for the public (congressional or legislative) allocation of funds to various entities. It is essentially synonymous with budget making in this context, since anticipated expenditures are frequently the basis on which appropriations are made (although this need not be so).

APPROPRIATIONS SYSTEMS

Public budget systems in which membership is established by law and participation of members is assumed. (See also base, increment budget systems. )

ARENA

An inter-organizational decision system. (See also budget system ).

ASSETS

An accounting term for what is owned or held by an organization and that has a money value.

AUDIT

A periodic (usually annual) investigation of the financial statements of an agency to determine the accuracy, fairness and the degree to which they adhere to standard practices of reporting and recording. An audit may be internal or external, independent or staff-directed.

AUDIT EXCEPTION

This term is used for items identified in an audit report as violations of standard accounting practice. These may be technical problems only, or more serious matters of malfeasance, embezzlement, or other illegalities.

AUDIT REPORT

A written statement, following a prescribed format, and signed by an authorized accountant (A CPA or LPA) to indicate that s/ he has examined the records of a particular entity and finds that the accompanying financial statements are a true reflection of its financial position.

AUDIT TRAIL

Documentation allowing an auditor to trace back from financial statements to original entries.

AVERAGE COST

 

BAD DEBTS

Accounts receivable from customers, clients or debtors determined to be uncollectible.

BALANCE SHEET

A financial statement designed to show the overall financial position of an agency or firm at a given moment. In commercial firms the standard format of the balance sheet is total assets = total liabilities plus total capital

BALANCED BUDGET

A budget in which the total revenues equal or are in balance with" total expenditures.

BASE

( 1 ) that portion of a budget request to which an agency is assumed by others to have a presumed or privileged claim; (2) operationally, an amount equal to last year's appropriation.

BASELINE

 

BENEFIT

That which is gained or increased by an action or transaction. An addition of something valuable or of resources.

BOND

A form of security issued by various levels of government to generate revenue over and above that raised by taxes. Bonds typically are used to finance capital construction, or other long-range, durable operating expenditures

BONDED INDEBTEDNESS-

The degree and amount of an agency S debt (liabilities) covered by bonds . Ordinarily, in bankruptcy cases, or other liquidation proceedings, bonded indebtedness is honored prior to all other claims.

BOOKKEEPING

The task of making entries in accounting records, or "books." A paraprofessional task usually performed by clerks.

BREAK-EVEN ANALYSIS

A set of techniques for determining the minimum units of service necessary to recoup the full cost of the service at the same volume.

BREAK-EVEN POINT

Point at which income or revenue equals expenditures.

BREAKING EVEN

The primary fiscal objective of non-profit organizations. The process of matching revenues and expenditures in a budget or in operations.

BUDGET

(1) a plan of future or anticipated activities, stated predominantly in fiscal terms; (2) a document listing words and numbers in paired sequences to reflect anticipated expenditures by category (and anticipated income, either implicitly or explicitly) for a given period of time.

BUDGET, ACCOUNTS PAYABLE

See ACCOUNTS PAYABLE BUDGET.

BUDGET, ACCOUNTS RECEIVABLE

See ACCOUNTS RECEIVABLE BUDGET.

BUDGET, ADMINISTRATIVE COST

See ADMINISTRATIVE COST BUDGET.

BUDGET, CAPITAL IMPROVEMENTS.

See CAPITAL IMPROVEMENTS BUDGET.

BUDGET, CASH

See CASH BUDGET.

BUDGET, COSTS OF DEBT

See COSTS OF DEBT BUDGET.

BUDGET, DEPARTMENTAL

See DEPARTMENTAL BUDGET.

BUDGET, DIRECT LABOR

See DIRECT LABOR BUDGET.

BUDGET, FUNCTIONAL

See FUNCTIONAL BUDGET.

BUDGET, INCREMENTAL

See INCREMENTAL BUDGET.

BUDGET, INTERNAL

See INTERNAL BUDGET.

BUDGET, LINE-ITEM

See LINE-ITEM BUDGET.

BUDGET, MARGINAL

See MARGINAL BUDGET.

BUDGET, OLD YEAR/NEW YEAR

See OLD YEAR/NEW YEAR TABLES.

BUDGET, OPERATING

BUDGET, PRODUCTlON

PRODUCTION BUDGET.

BUDGET, PROFESSIONAL AND PARAPROFESSIONAL SERVICES

See PROFESSIONAL AND PARAPROFESSIONAL. SERVICES BUDGET.

BUDGET, PROGRAM

See PROGRAM BUDGET.

BUDGET, PROGRAM MATRIX

See PROGRAM MATRIX BUDGET.

BUDGET, PROJECT

See PROJECT BUDGET.

BUDGET, SOURCES OF REVENUE

See SOURCES OF REVENUE BUDGET.

BUDGET, SUPPLIES

See SUPPLIES BUDGET.

BUDGET, UNIT COST

See UNIT COST BUDGET.

BUDGET, ZERO-BASED

See ZERO-BASED BUDGET.

BUDGET ANALYSIS

Process of examining items in a budget, and constructing or reconstructing budget documents. (See also budget making.)

BUDGET CYCLE

A sequence of events usually incorporating a request, publication, or circulation of criteria or guidelines; deadlines; formal presentations; budget analysis ; and decisions. (See also accounting cycle. )

BUDGET ENTITY

A fund or set of funds for which a budget is prepared and organized. One of the oddities of nonprofit financial management is that a budget entity may or may not be a meaningful program unit.

BUDGET FORMAT

Rules for organizing the information contained in budgets. (See also fund budgets, sub-fund budgets, and supra-fund budgets.)

BUDGET GUIDANCE MEMORANDUM

Textual document detailing policies, goals, principles, performance expectations or other guidelines upon which a budget is based.

BUDGET MAKING

Interpersonal negotiations and decision-making that convert budget documents and decisions into authoritative controls over agency operations and staff performances.

BUDGET PERIOD

BUDGET SYSTEM

Arena in which the primary focus of decision-making is on budget making.

BUDGET WORKSHEET

(See consolidated budget worksheet.)

BUDGETARY PROCESS

See budget cycle.

BUDGETING

The phase of financial management concerned with preparing a de tailed plan for the future expenditure of organizational funds in a manner designed to coordinate effort, maximize efficient use of resources, and attain goals. Incorporates budget analysis, and budget making.

BUDGETING, CAPITAL

See Capital Budgeting.

BUDGETING, PROGRAMMING, PLANNING SYSTEM

See Programming-Planning-Budgeting-System

CAPITAL ASSETS

Durable things owned by an organization the lifetime value of which extends longer than the year in which they were acquired.

CAPITAL BUDGET or CAPITAL IMPROVEMENTS BUDGET.

A plan for the future generation and expenditure of capita (land, labor, and buildings). It is most likely to be used in human service agencies in the context of a major construction projectbuilding or purchasing a new building, constructing a summer camp, etc.or in the purchase of expensive equipment.

CAPITAL BUDGETING

Process of proposing or scheduling the purchase, construction or acquisition of capital assets with attention to the justifications and economic or financial implications for the master budget.

CAPITAL INVESTMENT

A capital asset acquired or of interest principally because of its potential profitability or revenue generation. See endowment.

CAMPAIGN, FUND-RAISING

CAPITALIZATION

In non-profit settings, a term used loosely for the process of acquiring assets necessary to begin a program or service. See also seed money or front money

CASH ACCOUNTING

An accounting system once prevalent among agencies in the voluntary sector. Transactions are entered in journals only when cash is actually paid out or taken in. The principal virtue of cash accounting is its simplicity, although it can badly misstate an agency's financial position.

CASH BUDGET

 

CASH FLOW

The actual movement of money payments to, through, and from an agency. This is not to be confused With income and expenditure flow, which, in an accrual based system, records not only cash but also credit transactions.

CASH FLOW ANALYSIS

A set of procedures for plotting the patterns of fluctuation in cash assets at fixed intervals over an accounting cycle or part of a cycle.

CATEGORICAL GRANTS

Transfer payments in consideration of some specific objectives or purposes agreed to by the grantor and the recipients (grantees). Public assistance, and most other federal programs, are categorical grants.

CERTIFICATE OF DEPOSIT (CD)

Bank deposit with a fixed interest rate and maturity date.

COLLATERAL

Specific asset pledged to a lender as security for a loan.

COMMUNITY ACCOUNTABILITY

COMPOUND INTEREST

A method of calculating interest in which prior interest earned is added to the principal for computing current interest earned.

CONSOLIDATED BUDGET WORKSHEET

A budget format for consolidating a number of budget for different funds into a single, unified agency perspective.

CONSTITUENCY

Aggregate of persons and organizations whose support can be depended upon or mobilized when needed, for example, at key times in the budget cycle.

CONTRACT

Legally, an offer and an acceptance. In social work, it is a general term for an agreement between a worker and client, and in economic terms, an agreement affecting exchanges of goods and services. In recent years, the federal government has placed less emphasis on grants and more on performance contracts.

CONTRIBUTION MARGIN

In Break Even Analysis the amount by which the price exceeds the variable cost.

COST

A term with many nuances of meaning in accounting and economics. Usually, that which is given up in order to gain an objective. For most purposes, measured by expenditures or outlays But see also opportunity cost.

COST ALLOCATION

The process of assigning identified costs to specific cost objectives or cost centers.

COST BASE

The variable used as a basis for allocating overhead, such as patient days or student seats.

COST BEHAVIOR

The characteristic ways that costs change in response to events.

COST CENTER

               A type of responsibility center  in which cost objects are accumulated.

COST OBJECTIVE

Any object or thing for which measures of cost are sought – e.g., a program, unit of service, department, event or activity.

COST OF CAPITAL

The total cost of interest payments and other costs associated with raising capital.

COST POOL

A set of costs selected or identified for allocation.

CREDITOR

Individual or organization to whom the organization owes money.

CURRENT ASSET

Cash or other assets easily (and quickly) converted into cash, particularly during the current year. Short-term or near-term assets.

CURRENT LIABILITY

Obligations expected to be paid in the current year.

DEBIT

The left side of a ledger account. The term has no other consistent meaning. A debit represents an increase or a decrease in the account, depending on its location. (See also credit).

DEBT

DEBT MANAGEMENT

That aspect of financial management concerned with the tasks incidental to the processing or handling of an agency's debt.

DECISION-MAKING

Deliberate, intentional choice, particularly between a range of identified alternatives.

DECISION-MODELS OF BUDGET SYSTEMS

General or theoretical models of budget systems which focus primarily upon characteristic or critical decisions. (See incremental budget; performance budget; program budget; programming; planning-budgeting systems; zero-based budget).

DEFICIT

A financial condition in which expenditures exceed income during a fiscal period. The ability of nonprofit organizations to sustain deficits is very limited, and often wholly dependent upon the extent of their reserves.

DEFICIT SPENDING

Expenditures in excess of revenues. .

DEPARTMENTAL BUDGET

DEPOSITS

(I) Money placed in a bank account, and constituting a claim upon the bank. (2) The act of entering money into a bank account.

DEPOSIT TICKET

A receipt customarily given by banks as evidence of a deposit. Such receipts should be kept as documentation of journal entries of bank deposits.

DEPRECIATION

A decrease in the value of a capital asset ; over time. Ordinarily handled incrementally, with a standard portion of the full value of the asset subtracted each year of the useful life of the asset.

DEPRECIATION EXPENSE

Portion of the original cost of a capital asset allocated as an expense each year.

DIRECT COSTS

COSTS that vary directly with the output of an agency or program. Also known as variable costs.

DIRECT DISTRIBUTION

A method of cost allocation in which support center costs are assigned to mission centers.

DIRECT LABOR BUDGET

A SUB-FUND corollary of the UNIT-COST BUDGET that projects personnel costs of service by identifying the "direct labor" content of producing a unit of service.

DISCOUNT RATE

Interest rate used in discounting an asset.

DISCOUNTED CASH FLOW

A method of comparing cash flows in different time periods by discounting all to the present time.

DISCOUNTING

Method for determining the present value (PV) of an investment or cost by subtracting interest that could be earned from a future payment to determine its worth in the present time.

DIS-INTERMEDIATE

Remove an intermediary.

DONOR

DONOR CONSTITUENCY

The aggregate of persons and organizations that demonstrate their support for a NON-PROFIT organization through financial contributions.

DOUBLE-ENTRY BOOKKEEPING

A system of financial record-keeping in which every transaction is recorded twiceonce as a debit and once as a credit. Typically, the system of accounts in a double-entry set-up would include ASSETS, LIABILITIES, FUND-BALANCE (or surplus or capital), INCOME, and EXPENDITURES categories.

EARMARKINGS

A jargon term for the process of designating REVENUES for certain specific purposes. (The term itself is traceable to the practices of livestock sorting pens, in which animals are sorted into different groups and classes by dye marks on their ears.)

EARNINGS

Money payments to agency employees for work performed.

ECONOMIES OF SCALE

A term used to describe the tendency of certain costs of producing goods and services to increase less than proportionately with output. For example, an under-utilized therapist could increase his total caseload from ten to twentythus effectively doubling his production of service with no increase in cost.

EFFECTIVENESS

A measure of the achievement or attainment of goals basic to the determination of efficiency. To the extent that a program fails to accomplish its objectives, there is little, if any, basis for establishing its efficiency.

EFFICIENCY

A criterion of performance in the production of goods and services in which the solution or strategy chosen involves the least expenditure of resources necessary for goal attainment.

ENCUMBERANCE

 

ENTITY

See budget entity.

EQUITY

1) A principle in taxation that taxes should be levied so that the tax burden is distributed evenly or fairly among those being taxed. (2) In business, the residual value of assets after non-shareholder liabilities are satisfied. Since it is related to the investment and gains of stockholders (of which there ordinarily are none in human service agencies) the term has little application in this second sense to our concerns. (See non-distribution constraint

EVALUATION

After the fact, retrospective assessment and critical analysis of the worthwhileness of program. or service activities.

EXCEPTIONS, PRINCIPLE OF

See principle of exceptions.

EXCEPTION REPORT

A list of individual revenue or expenditure items or variances that differ from budget projections by more than a specified amount.

EXPENDITURE

An outlay or commitment of an organization's resources. Usually recorded in the accountingsystem as a reduction of assets or as a liability.

EXPENDITURE- CONTROL

One of a number of possible management control strategies, in which an effort is made to restrict or eliminate those activities that result in outlays beyond a determined level.

EXPENDITURE STATEMENT

A listing of the total expenditures in a given period, usually organized by a program, function, or other rational scheme. Also known as an expense statement for non-profit agencies, it may be combined with another statement into a single statement (sometimes mistakenly called a "budget.")

EXTERNAL AUDIT

An audit by an outside auditor, usually someone with professional accounting credentials (a CPA or LPA). Two types of external audits are of greatest interest in the human servicesindependent audits, required by many state not-for-profit legislation, and audits by a grantor or funding source.

FAIR-SHARE-OF COST FEES

Charges to clients based upon a fair method of allocating all outlays proportionately to all who benefit.

FEASIBILITY STUDIES

Assessment of the opportunity costs of a proposed solution to a problem.

FEDERATED FUNDING

 

FEE BUDGET SYSTEM

One of the major types of budget system in which the primary concern is with an internal budget that predicts the effects of fee income on program actions.

FEEDBACK, PRINCIPLE OF

See Principle of Feedback.

FEES

Money payments collected from clients, significant others and "third party payees. (See also Participation Fees; Flat Rate Fees; Sliding Scale Fees; Fair-Share-Of-Cost Fees; Third Party Fees.)

F.l.F.O.

First In, First Out. A system of inventory in which items are circulated so that the "First In" (the first added to inventory) are also the "First Out" (the first used).

FINANCE

               A field of knowledge of the alternative sources and uses of organization

resources.

FINANCIAL ACCOUNTING

Information systems suitable for recording, summarizing and reporting financial information, and identify financial events and measure their impact.

FINANCIAL BUDGET

The cash budget and capital budget combined.

FINANCIAL INTERMEDIARIES

Also known as fiscal intermediaries, or third-party funding. " Private organizations such as Blue Cross-Blue Shield, for example, act as fiscal intermediaries in the medicaid program.

FINANCIAL MANAGEMENT

In non-profit human service agencies, the subset of management concerned with control and intentional use of money and other scarce resources to further organizational goals consistent with law, ethics, and community standards.

FINANCIAL PLANNING

Preparing a set of financial decisions for action in the future that are directed at achieving program goals with special attention to financial means.

FINANCIAL RATIOS

Specific standardized statements of the relationship between two variables or factors that are useful for analytic or decision-making purposes.

FISCAL

 

FISCAL CONTROL

A system of rules, criteria, understandings, and contracts, designed to exercise control over the handling of the assets of a fund.

FISCAL PERIOD

The time period which is the basis of preparing budgets and financial reports.

FIXED ASSETS

Those assets, such as land or buildings, that are not ordinarily susceptible to sudden or drastic fluctuations in either quantity or value.

FIXED CHARGES

A standard or universal fee assessed clients or users of a service, regardless of other criteria, such as age, sex, "need," or ability to pay.

FIXED COST

A cost that does not vary, in the short run, with variations in output. Fixed costs are ordinarily those that will be 'borne by an agency even when it will not bear outputs.

FLAT RATE FEES

Charges to clients established at a fixed rate that is assessed to all who receive similar services.

FLEXIBILITY PRINCIPLE OF

See principle of flexibility.

FLEXIBLE BUDGET

A budget based on different levels of anticipated activity, e.g., a plan of agency activity with and without a major demonstration grant.

FLOAT

The interim from when a check is written (placed in circulation) until it clears the bank.

FLOATING DEBT

A short-term (or non-funded) debt, as opposed to a funded debt, which is secured by bonds or other securities.

FRONT MONEY

See seed money.

FULL COST

The sum of all costs associated with a cost objective. The total of direct costs and indirect costs.

FUNCTIONAL BUDGET

Expenditure items are categorized by "functional" categories such as personnel, supplies, or travel.

FUND

A fund is an asset or group of assets, together with associated accountabilities (liabilities and equities), that are related to an activity or purpose and maintained as an accounting entity (AICPA definition).

FUND ACCOUNTING

The system of accrual accounting in which accounting records are maintained by funds. Most governments use this system. Multi-funded agencies in the human services often maintain a separate fund for each major grant or funding source.

FUND BUDGETS

Budget documents formulated to guide or assist in fund decisions.

FUND DECISIONS

Budgetary decisions affecting a fund as a whole.

FUND DRIVES

See campaigns .

FUNDED DEBT

Long-term debt secured by bonds or other securities. Generally, for long-term borrowing -- to construct a new building, etc. A secured or funded debt carries lower interest and is less expensive than a floating debt.

FUND-RAISING

Administrative process of identifying, soliciting, and obtaining needed income or revenue through grants, fees, or other means.

FUND-RAISING COST

One of three major cost categories in the AICPA standards. The other two are administrative cost and program cost.

FUNDRAISING AGENT

A staff member, contractor or representative of a non-profit organization whose responsibility is to engage in fund-raising activities, especially, grantsmanship, or appeals to large donors, or campaigns.

GENERAL AUTHORIZATION

A standing approval of spending.

GRANTOR AUDIT

The solicitor general, the office of management and budget, and some grantor departments in the federal government may conduct periodic audits of agencies. Also, other grantors may conduct audits of the financial records of recipients.

GRANTS

Unilateral transfer payments from one government, foundation, or agency to another agency or program, usually y in support of service delivery or some other activity. Two principle types of grants are found in the human services

categorical and non-categorical. See also contracts.

GRANTSMANSHIP

A jargon term for the skills involved in locating money and obtaining it from sources in the form of grants. A type of fund-raising activity

HUMAN CAPITAL

A term used to designate the skills and abilities possessed by persons that perrnit them to earn an income.

HUMAN SERVICES

Services and programs directed at contributions to the socialization and development of persons; social care for those incapable of full autonomy; counseling and guidance; support of self-help and mutual-aid activities; and the planning, organizing, financing, evaluation, and dissemination of information about such activities.

INCOME

Generally, income is the flow of money or goods to an individual, firm or agency. It is distinguishable from revenue , which is only the money portion of income. However. in most non-profit human service usages, the two terms are usually interchangeable.

INCOME STATEMENT

A basic financial statement designed to list the basic sources of income (or revenue) of an agency. Depending on the purposes of the statement, its audience, etc., listings may be by program, type of income (e.g., fees and grants), and so forth. Since 1974, the AICPA's Audit has endorsed the incorporation of income, or operating statements, into a single generic "statement of support, revenue and expenses, and changes in fund balances." In all likelihood, many agencies will continue to use separate income statements for some time, despite the AICPA position. This new format appears to be a significant technical advance in program budgeting.

INCREMENTAL BUDGETING

An historical method of budget-making in which a base of funding established previously is assumed, and decisions are addressed to the size of an increment or increase. (Same as MARGINAL BUDGET.)

INDIRECT COST

Costs assigned to an object or responsibility center from support centers not directly involved in the production or delivery of the object.

INDEPENDENT AUDIT

An audit made by an accountant or accounting firm !, specializing in such investigations. Usually a third party. The audit report of an independent audit may be legally required to be available to the public.

INDIVIDUALITY, PRINCIPLE OF

See principle of individuality;

INPUT-OUTPUT ANALYSIS

A type of inductive, empirical economics created by Wassily Leontief, in which the final outputs of goods and services to consumers are related to the intermediary and initial inputs.

INSURANCE

A procedure for pooling risks. The most common form is a contract to pay premiums to a company in exchange for the promise of compensation in the event of specified circumstances. Social Security is intended to be a type of social insurance.

INTERNAL AUDIT

An audit made by members of an agency's accounting staff. Often, a kind of self-study. The work of the public wel&re quality control staff is an example.

INTERNAL BUDGET

A budget format developed by an organization or department for internal management use only.

INTERNAL CONTROL

Accounting checks and balances to minimize clerical errors and the possibility of fraud and embezzlement. A combination of administrative and accounting controls.

INTERNAL RATE OF RETURN (IRR)

Discounted cash flow measurement to determine the rate of return for a specific project or program.

INVENTORY

Stocks or stores of goods used as raw materials in production, and of work in progress and finished goods. In the human services, inventories are ordinarily of two types

(I) office supplies and materials, and (2) food, clothing, linen, and other supplies incidental to feeding or clothing clients, or operating residential programs.

INVENTORY ANALYSIS

A set of techniques designed to determine optimum levels of inventories.

INVENTORY CONTROL

Procedures and rules established to maintain adequate management control over items in inventory.

INVESTMENT

(I) A sacrifice of resource in the present followed by subsequent benefits or gains. (2) An expenditure with the explicit expectation of benefit or gain.

JOURNAL

A book of original entries. In journals, every transaction is recorded when it is completed, if the agency uses accrual accounting, and when il is paid for or money is received, if the system is cash based.

LEDGER

A book of accounts. Each account in a ledger is recorded on a separate page, and summarizes a large number of journal entries. Ledger pages are ordinarily divided in half, the left recording the debits and the right the credits.

LIABILITY

"What is owed." Claims or obligations against the assets owned by an entity.

L.l.F.O.

Last In, First Out. An inventory circulation method in which the items received last go out first.

LINE-ITEM BUDGET

A budget format in which program, agency, or fund entities are summarized as a single entry or "line item." See fund decisions.

LINES OF CREDIT

Management determined expenditure guidelines or "credit limits" assigned to subordinates as part of implementation of a budget program.

LONG-RANGE PLAN

Plan that covers a period of time longer than the current fiscal year.

LONG-RANGE PLANNING

a.k.a. strategic planning.

LONG-TERM

Time period longer than one year.

LONG-TERM FINANCING

Strategies or plans identifying alternatives available for obtaining capital assets.

LONG-TERM LIABILITIES

Obligations or commitments continuing over a period longer than one year.

MANAGEMENT

Administration. Some sources distinguish administration from management, usually suggesting that management is the narrower, more technical aspect of administration. The distinction is, however, a logical rather than an empirical difference, and is of questionable value.

MANAGEMENT BY EXCEPTION

A decision making approach in which attention is focused on exceptions, or cases which fall far from the norm or average. (Conceptually related to the statistical concept of outliers.)

MARGIN OF SAFETY

In Break Even Analysis, the amount by which expected output volume or revenues is expected to exceed the break-even point.

MARGINAL BUDGET

See incremental budget.

MARGINAL COSTS

The change in the total costs of production resulting from an increase (or decrease) of one unit produced.

MARGINAL COST ANALYSIS

Use of marginal costs to assess the impact of a decision.

MASTER BUDGET

Set of all the major budgets in an organization or unit, such as the operating budget, long-range budget, capital budget, cash budget and others.

MATCHING

The process of linking a set of revenues with other revenues in a revenue center and/or a set of associated expenditures in a responsibility center.

MATURITY

Due date, end date or competion date of a loan arrangement.

MATURITY VALUE

The principal (non-interest) amount of a loan to be repaid on the due date of the loan.

MICRO-ECONOMICS

Thal part of economics concerned with the study of individual decision unitsconsumers, households, and firms. The central concept of micro-economics is the market.

MISSION

The overall purpose or most general goals of an organization.

MISSION CENTER

A cost center measuring the final product, output or outcome of an organization.

MISSION STATEMENT

Formal, written statement of the overall purpose or most general goals of an organization.

MIXED COST

Costs reflecting both fixed costs and variable costs.

MODIFIED CASH BASIS

A set of accounting assumptions by which routine expenditures are recorded on a case basis but capital assets are recorded gradually over the years that they are used.

MORTGAGE

A loan secured by a specific asset.

MULTI-FUNDED AGENCY

Literally, an agency with more than one fund. An agency with a number of different revenue sources.

MULTIPLE DISTRIBUTION

A multi-step cost allocation approach in which all support centers are allocated to other support centers and mission centers and then remaining support center costs are allocated to mission centers through one or more additional steps.

NASB

The National Accounting Standards Board.

NET PRESENT COST (NPC)

Aggregate present value of a series of payments to be made in the future.

NET PRESENT VALUE (NPV)

Present value of a series of receipts less the present value of a series of related payments.

NET WORKING CAPITAL

Current assets less current liabilities.

NEXT-BEST ALTERNATIVE

An approach to assessing opportunity costs that involves comparison with the second choice, or next-best alternative.

NON-CATEGORICAL GRANTS

Transfer payments, usually between levels of government, for no specific objective or use. Revenue-sharing is such a grant.

NON-DISTRIBUTION CONSTRAINT

The general rule applied to nonprofit entities which states that surpluses or "profits" may not legally be distributed to stockholders or share holders.

NON-PROFIT CORPORATION

Legal entity created by the state, under control of a board of directors, and forbidden by law to distribute its assets as profits, gains or dividends. Assets of a nonprofit corporation are, by consensus, subject to the non-distribution constraint

NON-PROFIT ORGANIZATION

NON-REVENUE CENTER

In cost allocation, a responsibility center that does not generate revenues from its activities. See support center.

NOTES PAYABLE

Balance sheet item summarizing loans covered by notes, or contracts-to-pay.

OFF-BUDGET

Revenue or expenditure items not included in the normal federal or state (or other) budget.

OLD YEAR/ NEW YEAR TABLES

Any Iinancial report showing current items u ith comparable items from the preceding fiscal period for comparison.

OPERATIONS RESEARCH

An interdisciplinary field in which optimal solutions to management problems are sought. Critical path analysis, inventory analysis, linear programming, and program planning and budgeting are among the most widely known "o.r." techniques. The general model of operations research is systems analysis.

OPPORTUNITY COSTS

An approach to measuring cost in terms of the value of alternatives that must be foregone in order to achieve an objective. See next-best alternative.

OUTCOMES

Results that an organization is expected to achieve.

OUTLAYS

An approach to measuring cost in which the cost of a commodity is defined as the expenditure of resources necessary to obtain it.

OUTPUTS

The number of units of service provided.

OUTPUT BUDGETING

Another term for PPBS (Program-Planning-Budgeting Systems.)

OVERHEAD

See indirect costs.

OVERHEAD BUDGET

Another term for Administrative Cost Budget. A sub-fund budget

OVERHEAD RATE

The cost base divided by the cost pool.

PARTlClPATlON FEES

Charges to clients based upon the fact of their participation in a service or activity.

P.A.Y.E.

"Pay As You Earn. " Taxes collected by regular, periodic payroll deductions.

PAYBACK

A capital budgeting measure that estimates the number of years until the revenues of a project exceed the expenditures.

PAYROLLTAXES

A tax levied upon employers' wage payments. The state-federal unemployment compensation system is built upon such a tax.

PERFORMANCE BUDGET

A budget format and system in which past accomplishments form the basis for decisions about future resources.

PERFORMANCE CONTRACT

An agreement between two or more parties than one or more of them will provide a service or perform some other activity in exchange for some payment or reward from the other(s).

PERSONNEL

The employees of an organization.

PERSONNEL ADMlNlSTRATlON

The subfield of administrative science devoted to the personnel or manpower requirements of an administered organization. It is concerned w ith topics such as job analysis, work-load analysis, recruitment and selection of employees, career advancement and planning, and related issues. Affirmative action is largely a personnel issue.

PERT

Program Evaluation and Review Technique. A "time-budgeting" method useful in programming and project scheduling and involving many interdependent tasks.

PERT COST

A PERT method using time-cost data.

PETTY CASH

A fixed-limit amount of cash fund available to staff members for small, non-routine, or emergency purchases. All disbursements from such a fund should be supported by petty cash vouchers and / or receipts. When the petty cash fund is exhausted the totals should be posted in the appropriate journals (with the vouchers as documentation and a check for Ihe amount of the vouchers drawn to replenish the fund). Such a fund saves a larg number of small checks and journal entries.

PHASE OUT

Controlled and sequential termination of defunded programs.

PLANNED FISCAL REORGANlZATION

Planned and intentional realignment of fund entities.

PLANT FUNDS

Unexpended grants and appropriations held as cash or temporary investments for future purchases of plant or equipment, or the amount of equipment, buildings, and other tangible fixed assets held for use in the organization's operations.

POLICIES AND PROCEDURES REVIEW

An internal audit of existing policies and procedures conducted after budget decisions have been made to assurt conformity between agreements reached and existing practices.

POST BUDGET CONFERENCES

Meetings to follow up or implement budget decisions A major feature of post-budget programming.

POSTING

A bookkeeping term to describe the process of (1) notatlon, or o recording financial transactions in appropriate journals, and (2) sum marizing, or recording, journal-column totals in appropriate ledger accounts

PPBS

See PROGRAMMlNG-PLANNlNG-BUDGETlNG SYSTEMS.;

PRESENT VALUE (PV)

Value of future receipts or payments discounted to the current period.

PRICE

 

PRICE VARIANCE

Variances in line items due to fluctuations in the cost of acquiring resources.

PRINCIPLE OF EFFICIENCY

One of the principles of fiscal control in non-profit organizations, in which costs of rule-breaking are compared to costs of contro necessary to eliminate rule-breaking.

PRINCIPLE OF ENFORCEMENT

A principle of fiscal control in non-profit agencies that says that rules must be enforcable

PRINCIPLE OF EXCEPTIONS

The concept of management by exceptions applied to the context of fiscal control.

PRINCIPLE OF FEEDBACK

A principle of fiscal control that systems of rule should be subject to change, based on information about their impact.

PRINCIPLE OF FLEXIBILITY

A principle of fiscal control that

PRINCIPLE OF INDIVIDUALITY

A principle of fiscal control in non-profit organizations that says that rules of control must be tailored to the individual cir cumstances of the organization.

PRINCIPLE OF MEANING

A principle of fiscal control that states that rules must b meaningful to those who are expected to comply.

PRINCIPLE OF PRODUCTIVITY

A principle of fiscal control that states that the goal of service delivery should supercede the goals of Eiscal control, all othe things being equal.

PRINCIPLE OF REPORTABILITY

A principle of fiscal control concerned with specifi cation of procedures for reporting or discerning rule violations.

PROBLEM-FREE INTERVAL

Period when a client is not troubled by a problem fo which assistance is sought.

PRODUCTION BUDGET

A budget format in which sales of goods during a perio are combined with beginning and ending inventories to determine necessar production levels.

PRODUCTIVITY

The measure of the "productiveness" of a factor of production Operationally, the ratio of the amount of input required to produce a give amount of output.

PRODUCTIVITY, PRINCIPLE OF

See principle of productivity.

PROFESSIONAL AND PARAPROFESSIONAL SERVICES BUDGET

A budget format listing total costs of program personnel

PROFIT

Generally, the excess of revenues over expenditures. In practice, businesses may use a cost of goods sold statement to make an actual determination of profits.

PROGRAM

An interrelated set of activities for the production of services.

PROGRAMMING

Process in which agency and program administrators seek to translate program goals and budget guidelines into meaningful work routines that will result in the production of services.

PROGRAM AUDIT

Review of program operations to assess performance effectiveness and goal attainment.

PROGRAM BUDGET

Budget format that assumes convergence of a program activities with a FUND.

PROGRAM BUDGETING

A budget system in which decisions are based upon performance or expectations of integrated programs of activities.

PROGRAMMING-PLANNING-BUDGETING SYSTEMS

A particular model of program budgeting in which decisions are zero sum and based on program units that transcend organizational boundaries.

PROGRAM MATRIX BUDGET

A budget format in which items are displayed in rows and columns by program and some other dimension (most typicall y, common functional expenditure classifications).

PROJECT BUDGET

A program budget for a fixed-time program of activities.

PROJECT SCHEDULING

The process of sequencing the activities of a project. Techniques useful in such scheduling include Gantt, PERT PERT and PERT-Cost.

PUBLIC BUDGET SYSTEMS

PUBLIC DEBT

The total excess of public liabilities over assets. The largest share of public debt in the United States has been accumulated by the federal govemment. Most public debt is funded.

PUBLIC EXPENDITURE

Outlays by public agencies for goods and services, subsidies and grants, and debt service.

PUBLIC FINANCE

A branch of economics concerned with governmental financial policies and actions, and their impact. Public finance is concerned with taxation as the most important governmental revenue source, and assessment of the fiscal impact of public policy. Social welfare finance consists of elements of public finance, together with voluntary, or non-profit, finance as these apply to the human services.

PUBLIC SECTOR

That portion of the national economy (or local economies) consisting of governmental production and consumption.

PURCHASE ORDER

A standardized form (or facsimile) identifying a purchase and its source, prices, quantities, and other pertinent information. May be the same as a purchase requisition.

PURCHASE REQUISITION

A request for approval to make a purchase. Includes the information on the purchase order, as well as the reason a purchase is necessary, when it is needed, etc. When forms are used, a requisition signed by an authorized official becomes a purchase order. Many human service organizations use memos for both purposes.

QUANTITY VARIANCE

Variances in line items resulting from different levels of input than anticipated.

RATIO ANALYSIS

The analytic protocol for identifying key decision points in administrative systems, and the identification of a system of quantitative ratios to monitor changes at those points.

RECOGNITION

A point at which a particular financial event is determined to have occurred for purposes of recording it in the financial records of an entity.

RELEVANT RANGE

In cost analysis, the normal range of anticipated activity of a cost center.

REQUIRED RATE OF RETURN (RRR)

An interest rate that must be achieved for a capital project to be considered viable. Also called hurdle rate.

RESERVES

Liquid or fixed assets ASSETS in a fund not committed to program during the current fiscal period.

RESOURCEALLOCATION

Decision or choice processes in which the administration determines what resources are available, and to what production and distribution processes they will be devoted. Budgeting is an important resource allocation process for most hurnan service agencies.

RESOURCES

The agents or factors of production used to produce and distribute goods and services. The term also has a somewhat broader usage in the new political economy (llchman & Uphoff), where it signifies the agents that produce outputs, or results.

RESPONSIBILITY CENTER

A point in an organization with some measure of autonomous decision-making powers. May be a revenue center or a cost center or a

REVENUE

Frequently used as a synonym for income in human services. More accurately, the term refers to inflows "earned" by the efforts or activities of the organization holding a fund to which the inflows are added. As such, revenues "meter" (measure) productive activities of an organization in ways which other non-revenue inflows do not.

REVENUE CENTER

In cost analysis, a responsibility center that generates revenue through its normal activity. See also mission center.

REVENUE VARIANCES

Portion of the total variance attributable to differences between expected and actual revenues.

RISK

A condition in which particular decision or action strategies carry a range of possible outcomes (including possible negative or undesirable consequences), none of which can be determined in advance. Operations research has devised a series of techniques and procedures for estimating and handling risk.

RISK CAPITAL

Long-term funds invested in activities subject to risk. Also sometimes known as seed money.

SEED MONEY

Contributions or other REVENUES contributed prior to the start of a program, especially to finance the initial costs before regular funding is in place. (Also called front money. )

SHORT-TERM

Time period of one year or less.

SIMPLE INTEREST

A method of computing interest in each period solely on the basis of the original or remaining principal.  Specifically, interest payments previously earned are not included or recognized.

SLIDING SCALE FEES

Charges to clients which are adjusted by some meaningful criterion, such as "ability to pay."

SOCIAL COSTS

Cost of an activity, output, or program that are borne by society as a whole. The term is used both technically and euphemistically as a synonym for the social consequences of economic actions, e.g., the force leisure of unemployed ghetto youths as a "social cost" of automation.

SOURCES OF REVENUE BUDGET

A listing of dollars and percentage of total revenue figures by major sources of revenue.

SPECIAL EVENT

A set of activities intended to promote programs, , causes, or ideas in order to improve relations with the donor constituency, or in other way improve or expand community accountability , or increase support.

SPECIAL STUDIES

Cost analyses, evaluations, and other "one time" analyses con ducted to resolve specific management problems.

STANDARDS

Criteria used in evaluation ot performance.

STEP-DOWN METHOD

An approach to cost analysis in which support center costs are allocated to every other center that has not yet allocated its costs.

STEP-FIXED COST

Costs that are fixed over smaller ranges of activity than the relevant range. Also known as step-variable.

STRATEGY

Broad plan for the attainment of mission and objectives.

SUB-FUND BUDGET

A budget detailing part of the projected revenues and expenditures of a fund.

SUB-FUND DECISIONS

Decisions affecting only a portion of the assets in a fund.

SUPERVISION

A key aspect of fiscal control in non-profithuman service system~

SUPPLIES BUDGET

A Budget format detailing expenditures in the supplies classification.

SUPPORT CENTER

In cost analysis, a responsibility center not directly related to the mission or objectives of an organization or program. Not a mission center.

SUPRA-FUND DECISIONS

Decisions affecting the assets of more than one fund; typically the whole agency.

SWEEP

Arrangements to transfer money into and out of accounts automatically.

TAX

A mandatory charge required by a government of some element of i economic environment. Intended to be used as revenue by that government

TAX-EXEMPT

Excused or not obligated for tax liabilities applying to others. Usually refers to exemption from federal corporate income taxes under Section 501(c)3 of the IRS Code in particular. Such organizations are often also exempt from state income, excise and sales taxes as well.

THIRD-PARTY FEES

Charges to clients for services rendered that are paid by a "third party" (someone other than the client or the agency rendering the service)

THIRD-PARTY FUNDING

Fees, or grants or performance contracts that provide for support of a program by someone other than those receiving the service.

TIME VALUE OF MONEY

Recognition of the ability of money to earn interest and the resulting condition that the further into the future an amount is paid, the less valuable it is.

TOTAL VARIANCE

Sum of price, quantity and volume variances.

UNCOLLECTABLES

Obligations owed to the organization determined to be unobtainable and targeted for dismissal or removal from the list of accounts receivable in a process known as “writing off”.

UNIT-COST BUDGET

Anticipated expenditures are projected in this budget format by a formula of units of service produced multiplied by the standard cost p~ unit.

UNOBLIGATED FUNDS

 

VARIABLE COSTS

Costs that vary with changes in the level of output. Also known as direct cost. The opposite of fixed cost.

VARIANCES

 

VARIANCE, PRICE

VARIANCE, QUANTITY

VARIANCE, VOLUME

VARIANCE, REVENUE

 

VENDOR

Purveyor of goods or provider of services to an organization. To vend is to sell to.

VOLUME VARIANCE

Portion of the total variance attributable to changes in the anticipated work load level.

VOLUNTARY FEDERATED DISTRIBUTIONS

A budget system in which agencies that are members of a common fund-raising group receive proportionate shares of the funds raised.

ZERO-BASED BUDGETING

A budget system in which decisions are made on decision packages" that must be justified programatically.

ZERO-BASE BUDGET

Budget format in which proposed expenditures are organized into "decision packages".

ZERO-SUM BUDGET

Budget format in which no presumption of a BASE is permitted. 2) An assumption from game theory that for every winner there is an equal and opposite looser; that wins are offset by losses in equal amount.

THIRD SECTOR

A term now in widespread use to describe the set of organizations operating outside of government (the state) and business (the market). Also known as the Independent Sector and the Nonprofit Sector and in Great Britain, the Netherlands and elsewhere, the Voluntary Sector.

THIRD WAY

A term popularized by British P.M. Tony Blair, German President Gerhard Schrader, and President Bill Clinton for social problem solving through means other than government intervention or marketization. In an earlier period, the welfare state and mixed economies were perceived as Third Way alternatives between Nazi, Fascist and Communist totalitarianism on the one hand and free market laissez-faire on the other.

STATISM

Strategies directed at dealing with social problems and concerns through governmental regulation, service delivery, and other governmental strategies.

PRIVATIZATION

A term popularized in the 1980s by British PM Margaret Thatcher and President Ronald Reagan for a strategy directed at reducing the size of government and replacing what they perceived to be the bloated welfare state. By its nature, the term is somewhat ambivalent, since both marketization strategies and contracting with nonprofit organizations may be considered privatization.

REGULATION

 

CEO/Chief Executive Officer

In a corporation, the highest ranking employee who typically functions directly as the principal agent of the governing board.

CPO/Principal Program Officer

A generic term for the highest official in an organization whose primary assignment is oversight of the organization’s program of services. In a university, that person may be the Provost; in a hospital, the Chief of Staff; in a museum, the Chief Curator, etc. The title Program Director is also sometimes used.

CFO/Chief Financial Officer 

The executive responsible for financial oversight. Older titles may include Accountant, Chief Accountant, Comptroller.

CIO/Chief Information Officer

The executive with principal responsibility for the information technology and strategy of an organization.

Executive Group

In larger organizations, the top level managers who meet together regularly to discuss and enact strategy, identify problems and make decisions. Such groups typically include the CEO, CFO, PPO and others.

Capital Planning Committee 

In larger organizations, a subset of the executive group charged with studying and preparing for capital expenditure decisions.

Budget Committee

In larger organizations and departments, a sub-set of the executive group charged with primary responsibility for major budget decisions.

INVESTMENT COMMITTEE

In larger organizations and foundations, a subset of the executive group charged with primary responsibility for investing endowments, and large or long-term surpluses.

 

CDO/Chief Development Officer

The principal executive responsible for a development program or a fundraising department.